A lease had been granted to two companies; Tibbett & Britten Ltd and Tibbett & Britten Consumer Group Limited, who together comprised the tenant. Tibbett & Britten Ltd changed its name to Exel UK Ltd (Exel). A break notice was served on the landlord by solicitors who stated that they acted for Exel. The notice went on to state that it was given by the solicitors "as solicitors and authorised agents of Exel UK Ltd". No mention was made in the body of the notice of Tibbett & Britten Consumer Group Ltd (Consumer). However, the notice was headed with a description of the lease listing the original parties (including both companies as tenant).
The landlord argued that the break notice was invalid because it had not been given by or on behalf of both companies. The service of the break notice followed a long string of correspondence between the landlord's and tenant's solicitors about another matter in relation to the lease.
The High Court found that the solicitors were authorised to serve the notice on behalf of both companies. The solicitors were instructed by the property department within the tenant's group, and that department had authority to act on behalf of all the companies in the group. However, authority to serve a notice will not of itself validate it. The court therefore still had to decide whether the notice, drafted as it was, was a valid break notice.
An objective approach is to be taken to construing a break notice. What has to be considered is how a reasonable person, in the light of the background which could reasonably have been expected to be available to the parties, would have understood the notice (Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd). A mistake in the notice, even in the identity of the person giving it, will not necessarily invalidate it, provided that in all the circumstances its meaning is clear, the mistake is obvious, and the recipient can safely rely on it. Each case will turn on its own circumstances.
The court noted that the break right could only be exercised by the "Tenant", which expression meant Exel and Consumer together, or their "permitted assigns". Since the landlord had not consented to an assignment of the lease, it knew that there was no assignee who would qualify as someone entitled to exercise the break right. It would not know however whether there had been an unauthorised assignment, and therefore an improper attempt to exercise the break.
At all times, Consumer was still in existence, although it was a dormant company. This was discoverable through a company search. The court held that, being publicly available information, this could be taken into account in construing the break notice. On that basis, it thought that the absence of reference to Consumer in the notice as a company on whose behalf the notice was given would call for an explanation.
The court also took into account the previous correspondence between the parties' solicitors. Although in 2004 the tenant's solicitors notified the landlord's solicitors that they acted for both companies, later letters stated simply that they acted for Exel. Furthermore, the terms of the notice suggested that the draftsman had checked the provisions of the lease carefully, since reference was correctly made to the original parties to the lease, the date of the lease, and the relevant clause. Notwithstanding this, the notice did not mention Consumer.
The court ruled that, against that background, the notice would not unambiguously have been understood by a reasonable recipient to be an effective notice. Its terms would generate "real doubt" as to whether it was served on behalf of Consumer.
The court also rejected the tenant 's final argument that the landlord was estopped from denying the validity of the notice, on the basis of the prior correspondence. The court found that the tenant's solicitors had not relied on anything said by the landlord when they drafted the notice as they did. The notice was drafted in that way because the tenants' solicitors had believed, erroneously, that Exel alone was the tenant.
On that basis the tenant's arguments failed, and the notice was not effective to break the lease.
Things to consider
In the current climate tenants with break options in their leases are increasingly seeking to exercise them. Effecting a break can be less than straightforward, particularly if the lease lays down pre-conditions which must be satisfied before the break date. Attention can often be taken up with looking at these conditions. However, particular care must be paid to the notice itself to ensure that it is valid. Confusion can arise when the tenant is part of a group, particularly if the lease has been assigned intra-group or if one of the companies in the group has changed its name. The deeds packet for the property should always be examined in full to check the identity of the current tenant. Appropriate searches, at Land Registry and Companies House, should be made.
Tenants must be aware that, more than ever, landlords will be scrutinising the terms of notices served by their tenants. A mistake will not always invalidate a notice, but the risk is surely too great to take.
The Prudential Assurance Company Ltd v Exel UK Ltd (1) and Tibbett & Britten Consumer Group Ltd (2)